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Of kids’ health insurance and tobacco taxes

Rarely does Congress have the opportunity to achieve two important public policy objectives in one piece of legislation. With reauthorization SCHIP, funded by an increase in tobacco taxes, such a twofer may be in the offing.

Voters overwhelmingly support both goals. President Bush’s “philosophical” objections to SCHIP put him in opposition to 84% of Americans who told the CBS/New York Times Poll they wanted to expand the program to cover all uninsured children.

Taxes are usually more treacherous terrain than healthcare for kids, but tobacco taxes are different. A recent national survey we conducted revealed that 67% of voters favor a 75-cent increase in the federal cigarette tax, with the revenue dedicated to SCHIP, while only 28% oppose it.

Perhaps more surprising, support for the tobacco tax increase cuts across partisan and demographic lines as nearly three-quarters of Democrats, more than six in ten independents and two-thirds of Republicans all favor it. In addition, more than two-thirds of Southerners and 61% of rural voters support higher cigarette taxes. Even current smokers narrowly support the plan.  

Public willingness to increase tobacco taxes is not solely a function of the need to fund SCHIP. A few years ago our polling found even larger majorities supporting tobacco tax increases as part of efforts to reduce smoking. That majority expanded further when voters were told that some of the money would be used to fund tobacco prevention programs.

One does not have to rely on polls alone to asses the popularity of tobacco tax hikes. In recent years, voters themselves used ballot initiatives to raise cigarette taxes in states ranging from Colorado and Montana to Oklahoma and South Dakota.

While voters lack a clear understanding of the public health role of tobacco taxes, they nonetheless regard these tariffs as worthwhile, on even the chance that some kids will not start smoking or light up less often. A series of econometric studies concluded that every 10 percent increase in the price of cigarettes reduces smoking among kids by about seven percent and overall consumption by about four percent.

However, it is not just econometricians and anti-smoking advocates who understand the impact of cigarette taxes on consumption—internal documents tobacco companies were forced to make public during litigation a few years ago, are replete with references to the relationship between tax rates and the number of people who smoke.

One Philip Morris executive summarized the evidence on cigarette taxes, “A high cigarette price, more than any other cigarette attribute, has the most dramatic impact on the share of the quitting population…price, not tar level, is the main driving force for quitting.”

Rooting around companies’ internal files was not the only way to find evidence they recognized the impact of cigarette taxes on smoking—companies told the SEC publicly. “Significant increases in federal and state excise taxes on cigarettes,” wrote Lorillard in a 10-K filing “...have, and are likely to continue to have, an adverse effect on cigarette sales.”

As far as voters are concerned though, even a small impact makes it worthwhile. When asked to choose between an argument alleging that cigarette tax increases won’t really have an impact on youth smoking and a counterpoint suggesting that higher tobacco taxes were worth it even if they only stopped a few kids form smoking, voters agreed with the latter by a nearly 20 point margin.

Providing healthcare coverage to 3 to 5 million uninsured children, protecting kids and families, saving part of the $100 billion we now spend on smoking attributable healthcare costs—all while being seen as angels by voters—it’s a rare opportunity indeed.